Just because no one will vote for Medicare cuts doesn't mean there won't be Medicare cuts. No one in Spain voted for Hospitals to run out of Medicine, but you don't get medicine without money, and there will come a point where there's no money.

If you don't decide to throw something off a sinking ship, all the somethings will wind up in the water. The threat isn't what people will compromise, it's if they will compromise.

In a nutshell: someone will always lose out to do something for the greater good, but no one wants to be that someone. So in the end, everyone loses. That actually sounds quite familiar to many places - not just in the US.

"Why me!?" (And then money shuffles into the pockets of activists, astroturfers, lobbists)

Just so I understand, is it The Economist's view that raising taxes and pulling money out of the private sector won't slow the economy down and thereby ultimately lowering tax receipts wont, in the end, being somewhat counterproductive? I believe for the democrats to pay for their spending they'll have to expand the economy. Simply raising taxes, as ideologically exciting as it may be, will not do it and in the end may be counterproductive.

Here's an IDEA: Let's cut retroactively all yearly the increases Congress has voted for itself, going back 10 years. Lets cur their salaries and FREE MEDICAL BENEFITS. They get the best medical care in the world free of charge, well not really free of charge - WE PAY FOR IT!! How about those expense funds each member of Congress has: $175,000,000 for pencils, or whatever they want to use it for. Not including things like entertaining, clothing, travel, shopping by their wives...because guess what WE PAY FOR ALL THAT STUFF TOO! Does the American public loathe itself so much that we make sure Congress has the best of everything at our expense...while we don't have enough money for decent food, forget about those new shoes you need, need a vacation, not in this lifetime and we certainly don't deserve free medical care. Only Congress and their families do. So let Congress give up their entitlements before they take away any of ours. WE HAVE THAT POWER BECAUSE WE PAY FOR ALL OF IT! What the hell is wrong with all of us, we need to wake up and cast off the economic shackles we're all wearing. Aren't you tired of our millionaire, con artist government officials laughing all the way to the bank? LET'S UP AND VOTE THE BASTARDS OUT AND GET A CONGRESS WHOSE SALARY WE SET, NOT ONE THEY SET AND VOTE THEMSELVES HUG INCREASES EVERY YEAR AND THEN SAY SOCIAL SECURITY HAS TO BE CUT. lET'S CUT THEM OUT. I KNOW THEY'RE NOT DOING ANYTHING TO HELP ME...CONGRESS ARE THE NEW TERRORISTS AND WE PAY FOR THEIR ANTI-CITIZEN ACTIVITIES. LET'S VOTE THE BASTARDS OUT BEFORE IT'S TOO LATE.

Do the writers of The Economist not know the difference between Medicare and Medicaid? Let me explain some of the differences and also let me explain why we Republicans support Medicare and the Democrats support Medicaid:

1. Medicare covers only people who have worked. You qualify for Medicaid even if you are perfectly healthy but never worked day in your life.
2. People can only receive Medicare if they paid into the system. People can receive Medicaid even if they never paid in a single penny in tax.
3. Most people who receive Medicare vote Republican. Most people who receive Medicaid vote Democrat.
4. If we cut Medicare we will be asking 85 year old women to go get a job If we cut Medicaid we will be asking healthy 25 year old women to go get a job (and hold of on having more kids).

Perhaps this will help you understnad the difference between Medicare and Medicaid and also help you understand the difference between a Republican and a Democrat.

Most of the big spending in Medicaid is on seniors who require custodial care and have exhausted their assets, and the disabled. Spending on the actual working age poor is lower, because they require less health care.

The federal government covers a much higher share of Medicaid expenditures in the Red States than in the Blue States.

But WT, You do understand that the lion's share of welfare recipients in Red states are democrats. I live in a Red state. I know several people (including family) that collect welfare. They are all democrats. They all supported Mr. Obama in hopes of getting even more welfare benefits.

Medicare covers all seniors over the age of 65 regardless of working history (premiums may vary) and younger disabled persons. Roughly 42 million seniors and 8 million disabled. Income level and financial resources are not part of eligibility and it is entirely funded by the federal government.

Medicaid provides assistance for roughly 50 million people including one-third of all children and 60% of all nursing home patients. Eligibility is based on income (133% of the poverty line or less as of 2014) in addition to other requirements: children, pregnant women, various disabilities, and seniors in nursing facilities. Medicaid is managed by individual states who provide roughly 50% of the funding with the federal government picking up the rest of the tab.

Those are the facts about both programs, stereotypical judgement statements about the demographics involved may now be made based upon personal political preferences. (Note: it's actively one-third of all Americans and nearly every American over a long enough timeline that will be covered by both programs).

When referring to welfare, you should be referring to social security (20% of the federal budget) and other assistance programs (unemployment, food stamps, etc.) Whereas, Medicare/Medicaid (also 20% of the federal budget) are social health coverage plans required due to the exorbitantly high price of healthcare in the US. Discretionary defense spending is also 20% of the federal budget and together they form the holy trinity of unassailable government spending.

To the extent this article is supposed to help my friends in the UK better understand America, there is some bad information in this article. Partially that's because it's really a round up of a dozen articles all with bad information in them. It's as if the Economist author's intent was to find the worst information in each of the other articles and cobble it all together.

Most important, the UK reader has to understand that U.S. Social Security and Medicare are primarily based on separate tax streams that have nothing to do with the United States income tax discussed in this article, the so-called Bush tax rates that were recently fixed at the rates w99% of us have been using here on a temporary basis for 12 years. Yes, we U.S. fiscal conservatives are trying to starve that beast and hopefully we have come even closer to success (although nothing is permanent; another Congress can raise the income tax rates any time it wants).

Social Security is based on a separate 12% tax on income up to $110,000 (all round numbers) and Social Security payouts are raised annually based on an antiquated estimate of inflation. (Truth in advertising: I am a Social Security beneficiary.) Lower income beneficiaries receive a higher payout proportionately. Higher income beneficiaries pay income taxes on Social Security payouts even though they already paid taxes on the share of their income that was put into the social security fund in their name. Social security payouts can begin as early as age 62 but must begin by age 70; the longer you wait the more you get per month. But of course if you wait, you're betting you live a long time; the general rule of thumb is that if you start collecting at 62 and live past 82, you "lose" money vs what you otherwise would have received in aggregate. There is no vesting; if you die before you start collecting, your heirs basically get nothing (but there is an exception for families with minor children). If you die after you start collecting but before you get back everything you paid in for 45 years, your heirs get nothing more.

The whole Social Security system can easily be made solvent by slightly tweaking any or all of the numbers mentioned above: the amount on which the 12% tax is paid, the 12% tax itself, the formula by which inflation is adjusted, or the age at which you can first collect. These sorts of tweaks have been made every 20 years or so since Social Security began and will certainly be made again. The whining in this article is meaningless.

Medicare funding is a little more complex. The vast majority of it is funded by another separate 3% payroll tax you pay over your working life and by premiums you continue to pay after you join the system, usually at age 65 whether or not you have retired and whether or not you are collecting Social Security. (Truth in advertising: I am a Medicare beneficiary.) Medicare is very inefficient and very bad insurance. It does not include catastrophic coverage but it also has very high co-pays and deductibles. It does not cover drugs, annual physicals, vision/aural/dental requirements and many other health care services. It does not cover us not only when we are in the UK but even if one of the many of us that lives along the Canadian or Mexican or Bahaminian borders just crosses over for an hour and has a heart attack. The big debate over Medicare here in the U.S. is more about fixing the actual problems with it as insurance than it does with fixing the revenue stream (which again could be accomplished with some very minor tweaking).

Of course, it's important to note that excess revenues from the social security tax are loaned to the government and spent in the current period. When those bonds are redeemed later (when expenditures exceed revenues by an increasing margin) the repayments must be funded by curent taxpayers. It's neither insurance nor a pension; just a tax and transfer scheme.

One must not forget the $100 Billion a Year that goes for Corporate Welfare; Earmarks, and other Pork that benefits the Rich. Must not forget either; the Billions wasted on Military Boondoggles, like the F-35. A TRILLION DOLLARS for 2000 Planes - - plagued with Probems? I think not! People need to consider national priorities other than putting money into Corporate Welfare to Benefit the Rich.

There are advances in healthcare delivery coming that are going to make all this moot if we get out of the way and let them be implemented. At present we are being held hostage to a system that is making lots of money for a few people and they just don't want to give it up. Same in the energy field.

Can you share a few examples of what these might be? We need a proactive approach to maintaining good health rather than costly and largely ineffective long term treatments. The trend in medicine seems to be to prolong lifespan but not the quality of life. The key is to allow people to lead independent productive lives, not to just languish in an assisted care facility. Or at least give us the option to terminate our own lives if we are trapped in broken bodies. I personally do not want that existence and it frightens me that I will end up there.

I totally agree I've had a few family members just veging out in a nursing home what a waste of money times that by thousands of people across the country. The problem with that is who's going to be the one that says we need to put people down like animals. Funny thing is when our pets are suffering we put them down so they don't suffer but granny with a stroke staring into out of space its wrong let them suffer its inhumane to put people out of their misery. I'm from Mass and we recently had a proposition on the ballot to be able to put people down that were suffering it was put down quite easily.

Short of 'putting them down' we'd simply migrate toward the approach the European systems use to ration care. The older the person, the more grim the prognosis, the less likely that extraordinary measures will be undertaken to extend life. Hospice is what we're talking about here to address the fact that the majority of lifetime health expense is today incurred in the final (usually miserable) months of life.

Medicare should survive largely intact until enough Baby Boomers are gone or are too senile to fill out their absentee ballots. This could be 25 years from now, by which time the federal budget will be consumed almost entirely by debt, drones, and dialysis. In that sense, I agree with Mr. Chait.

The other functions currently undertaken by government will go neglected or be taken up, patchwork style, by states (hopefully not just California). The upside is that some fruitful experimentation might happen, and corporate America will eventually get too frustrated at navigating this policy archipelago and acknowledge that for some social functions, a government with national jurisdiction is actually the most efficient institutional provider.

This leads to a discussion of one of our society's greatest undertakings: health care. The vast preponderance of objective analysis indicates that socialized, universal government healthcare is more efficient in terms of both cost and outcome than the hybrid monster we have now. Conservatives allege that an "all private" model would be more efficient still, and they might even be right (I just wish they wouldn't have run screaming from the "public option" so they could go head to head and we would know for sure).

But even "all private" healthcare would have to be universal, and universal coverage of the poor requires transfers. And even "all private" healthcare would need some claim limits to preserve solvency, and claim limits require death panels.

As far as I can tell, America's long term solvency and competitiveness depends on getting this right. We will ultimately have to have Medicare for all or perhaps Medicare for none. Either way, we will also need universal coverage, death panels, and the transfers and limits they imply. Sadly the Boomers will pull another trillion or so out of the current system before we can contemplate the necessary reforms.

"America will eventually get too frustrated at navigating this policy archipelago and acknowledge that for some social functions, a government with national jurisdiction is actually the most efficient institutional provider."

It may have dawned on them, that the party politcs they have so enthusiastically promoted for several decades is now serving them badly, but that might be hoping for too much. I think they are just confused and upset their magic cookie cart isn't baking up the goodies.

I'll try to respond to your message without sounding defensive. I'm a boomer and nothing could be further from the truth that what you just said. I personally believe that medicare is a flawed system and would welcome universal healthcare for all that is focused on preventive treatments and holistic quality of life and preventing catastrophic illnesses. So do many of my peers. But until we do have such a system in place, we will not stand by and watch healthcare coverage pulled out from under our feet just as we approach retirement. It seems that most of the proposals coming from the right are designed to slash coverage without regard to a long term solution designed for all. As for privatization, I fail to see how such a system would remove administrative and overhead costs since that is the system in place today. The insurance industry would implement a system that protects their profits while slashing coverage. Do you really trust corporations to do anything except maximize profits and cut expenditures for health services? That is not an effective solution and there is a reason why every other advanced economy has nationalized coverage.

Teacup - - you are a Hicup! The Nation could save $400 Billion a year in HC Costs, by adopting a Singe-Payer - - National Health Care Plan. The Infrastructure is in place. Put everyone that wants it, under Medicare. Seniors love it! A recent study concluded that about $785 Billion Dollars is wasted yearly in the HC Industry due to Fraud, Errors, and Waste. EVRYONE is scamming the CURRENT System: Patients, Doctors, Hospitals, Insurance companies, Big Pharma, and more.

Operating independently; rules and processes are established to benefit the Industry. Ask the Doctors; the left hand does not know what the right hand is doing. Good Health Care? I think not - - unless you are Rich! 195,000 died in Hospitals last year due to non-enforcement of protocols. Paying the blue and green aides $7.50 per hour doesn't get one much commitment.

So, we will continue to increase the bottom lines of the rich, private insurance companies; and, in the process, let our HC Costs exceed 2.5 X, that of other Developed Countries. Tis' a shame! But, when it comes to Selfishness and Greed; American Predator Capitalists, reign supreme.

I won't disagree, in fact you are just seeing a relative lull in my general outrage with the system. Single payer is one part of a solution, although not the only part, nor is it the only kind of system that can render universal coverage and better results.

The other part is changing the incentive structure of the medical industry. Simply put, they should profit from health, efficient return to health and the best bang for buck, not for procedures and tests per se.

so socialists have been so wildly successful at selling the concept of the welfare state and the concept of free government handouts that it is starting to endanger all the other things socialists want their government to do?

Well Medicare as we know it is doomed, but that's because its clearly unaffordable at almost any tax rate. There are two options:

1. Limiting covered procedures/drugs by cost/benefit analysis in a one payer system (death panels). Keep to a budget by not doing expensive things, like the NHS but more drastic.

2. Fixed rate (variable subsidy) Medicare provided by private medical groups competing on what services and procedures are on offer. A voucher program that forces the providers to be heartless economizers, rather than the government, which just limits the growth of the voucher.

Or perhaps you'll get to choose from the two options. But Medicare as we know it, where you can get anything you and your doctor want, and he gets paid fee for service, will be dead. As the saying goes, "Anything that can't go on forever, won't".

Option 2 would still require government death panels. Otherwise private insurers could tailor their plans to deny coverage for bad risks. There has to be a uniform level of coverage. If we're going to cover everyone, there's no way around death panels. I still favor the voucher system though because it promotes private innovations in cost reduction.

I wish we could drop the use of loaded words such as "death panels" as we conduct this debate. Clearly, no one can expect an unlimited commitment of public funds (or even insurance proceeds) to their health care. One way or the other it has to be rationed, and what may be appropriate for a 21-year old with a life threatening illness probably isn't for someone in their 80s. Call it "death panels" or a risk-based insurance premium, it's rationing just the same.

vouchers per se don't fix perverse incentives, that's fee for service. A system where health of populations and best bang for bucks is rewarded moves to a better incentive structure. Basically a system that sets an affordable percapita, then asks how can we achieve the best health and outcomes per buck?

For elective and plannable procedures and needs, a health care savings account allows people to save up for procedures and services they can price.

Capitation has had mixed results, mostly disappointing. You might be able to reduce bypass surgeries by focusing on cheaper prevention but you can't do that for cancer. The vast majority of the costs are "unpreventable." And capitation has the opposite perverse incentive. Not enough care. The physician forgoes a beneficial test or treatment because he doesn't make anything off it. For a variety of reasons health care costs are rising and there's not much we can do about it, nor should we think we necessarily need to do something about it.

At any rate, all this is stuff private insurers can experiment with. Let them compete. It doesn't guarantee dramatically better results but there's no harm in trying.

It's being rationed on the basis of some sort of cost-benefit analysis. Whether this assessment is being done by an employee of a private insurance carrier or a bureaucrat at the Center for Medicare/Medicaid Services. Of course one can always purchase additional care using your own funds.

I actually think "rationing" has a more negative connotation than "death panel." "Rationing" sounds communist. "Death panel" sounds like a term a right-wing contrarian would embrace. Anyway that ship has sailed. We're calling it death panels. You can't put that back in the box any more than you can put "ObamaCare" back in the box. You're better off embracing it.

I'd go for death panels with options, ranging from implanted pain management (implants, because self-administered would surely be a recipe for drug addicts to prey on the elderly) to something akin to soylent green's euphoric last hurrah--of course omitting the part where folks are afterwards processed into crackers.

"But the cuts have effectively curtailed the vision of liberals who want government to do things like invest in basic scientific research, improve infrastructure, kick-start green technology and support education. In that sense, it's true, the ability of Republicans to block Democrats from expanding the tax base has been a conservative victory."

A victory that doesn't actually win ostensible aims is not victory, but incompetence. On the Democratic side, the fact they can't and won't Name the Problem, although it was during the health care legislation run up (Remember all the mentions of bending the curve?), is another form of incompetence.

By surrendering to what was 'practical' Obama failed miserably.

""A genuine leader is not a searcher for consensus but a molder of consensus." -- Martin Luther King Jr.

The Republicans are absorbed by ninny Norquist, and the Dems figure they blew their wad on Obamneycare.

Sir:
The article seems to conflate Medicare and Social Security with a vaguely distasteful "welfare state" surrounded by the aroma of lazy slackers who only want to sup at the public trough.

Both Medicare and Social Security have specific employer/employee tax contributions, and indeed Social Security is nearly whole over its entire life cycle-- the real problem is that starting with Lyndon Johnson the Social Security (and to a lesser extent, Medicare) surpluses have been stealthily spent on everything and anything else. Indeed, the latest information implies that soon retirees will never recoup their "investment" in Social Security made over their working lifetimes, the retiree will die before they get their money back on average. The claim that SS is an entitlement is thus like saying a car that one has bought is an entitlement... stating that SS is "pay-go" is not germane either, since if that was the case why build up a surplus?? Oh, right, so that the politicians can hide bloated deficits elsewhere-- a tack also not germane to being an "entitlement".

Medicare is a bit different, as the payroll tax is not adequate to support the outlay. The payroll tax should rise, or the eligibility age should change, or Medicare made into secondary coverage, or any of numerous other fixes can be implemented short of reducing coverage and consigning seniors to a painful death in the gutter. The delusion that "somehow" one can "save" enough on a private sector income for retirement medical is laughable-- the majority of those wanting to reduce Medicare seem to be those that have other retirement medical coverage or perhaps wealthy enough to afford old age medical payments in America.

The primary thrust of the preceding is that both Social Security and Medicare have well defined specified income streams, not leeching from general revenues like most other programs such as Medicaid. Those trying to greedily attack programs with a real income stream almost invariably seem to want to use the revenues thus saved for some other purpose-- such malicious perfidy should be exposed for pain it causes retirees.

If Social Security really had a trust fund, not an accounting fiction, it would be investing trillions of dollars for its future beneficiaries, like the system in Canada. But it isn't. So you can pretend there's a trust fund, but if you can't withdraw from it without issuing new federal debt (and you can't), then it doesn't really exist. It's a pay as you go system, a tremendous success as a means to reduce poverty amongst the elderly, and a disappointing flop as a retirement savings plan for the middle class. Blame FDR for selling it as something that it wasn't.

SS actually is a trust fund, and buys bonds from saved revenue to fund future obligations. Of course, under the Fed's zero interest, past bonds that earned 5-6% when are redeemed are reinvested in bonds that earn 1%. Even at 5-6%, SS is projected to go negative in 2032 (don't recall the interest rate in that projection); at 1%, SS will start running a negative balance in but a few short years.
That being said, the government has washed out distinctions being revenue streams, trust funds, agencies not back by government guarantees (Fannie Mae, anyone), private banks (TBTF banks), insurance companies (AIG), private pension funds (GM), and any boy and his dog who has a lobbyist on K Street. They all get funded; until they can't.

SS has no trust fund. The excess revenues are lent to the government and promptly spent. Gone. Poof. All that's left is a future promise to pay benefits, which is funded from future taxes (when the bonds are redeemed).

It's nothing more than a tax and transfer program. Which would be fine if it weren't for the distortive effects on federal budget analysis.

I wish you and other commentators would stop repeating the fiction that taxes were only raised on income above $400,000 for individuals ($450,000 for couples). It may be buried in the fine print, but the phase out of deductions and exemptions represents a significant tax increase on incomes great that $250,000 even if the marginal rate was not increased.

"But public attention is a very limited commodity; it's impossible to actually marshal public attention to each of the individual programmes that get cut when "government" gets cut". This is certainly a good excuse to use to keep the public out of the conversation isn't it. The public attention wouldn't be so limited if the politicians and journalists took the time to objectively explain the issue, if they didn't get into the phoney "it all has to be balanced rhetorically", and the damn politicians were actually interested in solving a problem vs playing lap dogs for big special interests. Blaming the public for not being involved is an easy out for the politicians, they don't have to work very hard that way. It falls directly into those "don't worry your pretty little head about it" "thats a man's job""trust me" "barefoot and pregnant"and "legitimate rape" categories.

Isn't it time to stop treating the public as though they don't really exist except when money is needed/wanted for campaigns, "investigative journalism", and to keep special interests funded?

"it's true, the ability of Republicans to block Democrats from expanding the tax base has been a conservative victory"

I agree that 'starve the beast' idea doesn't work. But in regards to the above quote, could you please point me to the liberal politician who wanted to broaden the base? I may have missed one, but i don't recall anybody wanting to raise taxes on middle class. From what i recall, even you, M.S., only argued for rolling back the tax cuts for the rich. Nothing about broadening the base - idea that i'm actually quite sympathetic to.

Well, yes, true. But i don't recall Obama or any other Democrat campaigning on 'lets revert the payroll tax back' platform. All they were touting were tax hikes on the rich. Bush tax cuts were for 10 years, with extension afterwards - not too temporary in my book.

The payroll tax reversion didn't expand the tax base. It reverted to higher tax rates. Democrats opposed expanding the tax base, or at least they oppose it as an alternative to raising rates. MS is wrong.

This is a big reason why I want a flat tax with a possible exception of a millionaires' bracket just to placate the left. We now have 3 filing statuses, 7 tax brackets (not including the implicit 0-bracket), and countless deductions and credits. This is insane. We should have 1 filing status (multiple individuals can file jointly by simply adding up their income), 1-2 tax brackets, 1 personal tax credit, and 1 child tax credit. Let everyone's taxes and benefits rise or fall simultaneously.

Muddled? Just because we expect of a President everything one expects of a head of state, including non-partisanship. Plus everything one expects of a head of government, including partisanship. (Walking on water optional. But barely.)

I disagree on the presidential veto, it's really his only check against the power of Congress. Each branch has power to check the other two, and removing the president's check against the legislative branch would be a very bad idea in my book.

There should be no check on the will of the governed expressed through Congress. Congress can remove a president or Supreme Court justice but not vice versa. Sometimes laws conflict so the Supreme Court has the task of sorting that out but that's not a check on Congress. That's a legal necessity. Granted, judicial review is not a legal necessary but nor is it explicitly required by the Constitution. It's a judicial convention we've grown accustomed to. Congress can even override a presidential veto. Congress was intended to be supreme but the Founders weren't able to rid themselves of the last remaining vestige of monarchy. The presidential veto violates the principle of separation of powers and democracy itself. Abolish it.

"This will not provide enough revenue over the long term to support America's welfare state (Medicare, Social Security, Medicaid) at anything like current levels."

Sure it will. The current pace of increase relative to GDP? That's another matter.

"The cuts have effectively curtailed the vision of liberals who want government to do things like invest in basic scientific research, improve infrastructure, kick-start green technology and support education. In that sense, it's true, the ability of Republicans to block Democrats from expanding the tax base has been a conservative victory."

Unless as a result the Blue States have these things, as states take up the burden, and the Red States do not. Which was the pre-New Deal situation.

Red states have taken up the burden. They are the ones with low joblessness and good economies, enabling them to be more innovative and successful. You'll notice that it's all the blue states that are on the brink of bankruptcy and who are having trouble balancing their budgets, which means they can't " improve infrastructure, kick-start green technology and support education."

Granted Montana and Kentucky are really red states that happen to have Democratic governors. But then again Michigan, Wisconsin, New Jersey and New Mexico, which also expected to run surpluses, are really blue states that happen to have Republican governors. Seems like a wash overall.

Uh, Texas is about as red as states come and the only reason we didn't go bankrupt is our legislature eviscerated the education budget (underfunded by several $billion). That's not a recipe for long term success - education is becoming more important for success, not less. They also cut the social safety net to the bone and we're about to lose medicare funding because we can't seem to separate church and state here (it involves Planned Parenthood funding).

And except most red states are net beneficiaries of blue state fed taxes. But they can be my guest and send the money back. After several decades of largess for government employees especially police. firemen and prison guards, indulged by the right and the rest indulged by the left, muncipalities, and states are now canibalising services to pay their bloated pensions. It is up in the air if the damn will break, and these pension funds will be restructured. All of them bought the Kool Aid of 10% ROI forever, ignoring most of it has been a bubble.

You have that right - - WT. The Rich do not want to pay for anything that resembles the Public Good. Not, Education, Environment, Health Care, Alternative Energy, Infrastructuere - - no Nothing! Yet,they are quick to the Corporate Welfare Trough - - to the tune of a $100 Billion annually. They also got Rich by Off-shoring 20 Million Jobs over the past 30 years. They have also benefitted greatly from $3 Trillion in Tax Cuts over that same 30 year period.

As for the HeartLand: Red States have done well as we see the emergence of a new Class of Millionaires - - Large Farm Operators - - who, often receive Subsidies from Uncle Sam.

We are either going to have One Nation - - Indivisible - - or We Are Not! Extreme Selfishness will lead to Civil War; as Pundits are saying that, the Nation has not been this Divided since the Civil War.

You have that right - - WT. The Rich do not want to pay for anything that resembles the Public Good. Not, Education, Environment, Health Care, Alternative Energy, Infrastructuere - - no Nothing! Yet,they are quick to the Corporate Welfare Trough - - to the tune of a $100 Billion annually. They also got Rich by Off-shoring 20 Million Jobs over the past 30 years. They have also benefitted greatly from $3 Trillion in Tax Cuts over that same 30 year period.

As for the HeartLand: Red States have done well as we see the emergence of a new Class of Millionaires - - Large Farm Operators - - who, often receive Subsidies from Uncle Sam.

We are either going to have One Nation - - Indivisible - - or We Are Not! Extreme Selfishness will lead to Civil War; as Pundits are saying that, the Nation has not been this Divided since the Civil War.

You have that right - - WT. The Rich do not want to pay for anything that resembles the Public Good. Not, Education, Environment, Health Care, Alternative Energy, Infrastructures - - no Nothing! Yet,they are quick to the Corporate Welfare Trough - - to the tune of a $100 Billion annually. They also got Rich by Off-shoring 20 Million Jobs over the past 30 years. They have also benefitted greatly from $3 Trillion in Tax Cuts over that same 30 year period.

As for the Heart-Land: Red States have done well as we see the emergence of a new Class of Millionaires - - Large (some small), Farm Operators - - who, often receive Subsidies from Uncle Sam.

We are either going to have One Nation - - Indivisible - - or We Are Not! Extreme Selfishness will lead to Civil War; as Pundits are saying, that, the Nation has not been this Divided since the Civil War.

If i knew that Buffet had to sell to raise cash for taxes, i would never pay full price for his assets. Given that market value is subjective, his assets would be worth whatever i'd be willing to pay for them. And since i know that i'd have to pay tax too, i'd make sure to plea poverty. hence asset collapse.

This is true, but why would anybody pay more than they had to? Most people shop for cheapest price when given a chance. At the very least, any rational investor would try to depreciate out book value of an asset, and attempt to conceal cash flows (lobby, deductions etc). It's just a reasonable expectation.

"You believe the market is rational, and makes those kinds of calculations as a group?"

Not really, but i'd advise you NOT to base fiscal and/or monetary policy based on irrational bubbles. You are quite right to note that a lot of people make irrational decisions. But in the long run, those people get butchered in the marketplace. Thus, you should not rely on them for any significant long run cash flows.

Once irrational people get butchered out, markets will equilibrate to asset values that account for your wealth tax. Count on it.

"As I write this, the Dow is at 13,442. Is that rational, or irrational, fair value? And, if so, as defined by what?"

It is irrational, based on the state of the economy. It is rational, based on Fed actions. My question to you - is it rational during a flash crash, or is it an arbitrage opportunity?

And i wouldn't know the difference until i bet my own money on it and feel the consequences. :)

"One example is gold. Buffet says that buying gold is irrational because it doesn't provide cash-flows, while a whole lot of gold bugs made a lot of money over the last few years."

Buffet is correct. If your game is long term, gold is only about as good as inflation expectations. Which means, not good enough. Doesn't mean you can't make a lot of money in short term playing bubbles, but when it comes to say monetary or fiscal policy, i wouldn't base it on gold.

"In the meantime, taxes on capital gains for those on higher incomes just went up, as did the market. Was the market irrational?"

Perhaps. You yourself mentioned that 1% controls 40% of assets. It would be foolish to think there won't be counter action on behalf of 1%. Perhaps you should short the market and make a lot of money?

We may not all agree on what level of taxation is appropriate or the best method of collection but I'd hope we can, more or less, agree on the big picture tax regime. And an asset tax has no place in that big picture.
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We already have an asset tax of 2% or so. It's called inflation. It doesn't require a huge bureaucracy to determine asset values (and it would have to be HUGE). You can hedge against inflation so maybe you want an asset tax on inflation hedges. But you actually want to give people an inflation hedge as a savings option. The alternative is to discourage asset build-up. A vacation would be tax-advantaged compared to savings. That's a horrible incentive. If you want to tax wealth, just tax their income at a higher rate instead of a trickling tax over a lifetime.

It frees up money for spending like disaster relief and it pays for mortgages and student loans.

"Consumption taxes are regressive."

You're the one who suggested a VAT. A consumption tax can be as progressive as you want it to be. An income tax can be as regressive as you want it to be.

"As we've seen, the money isn't there when taxing the income of wealthy folks, and hence the need to look at taxes on assets."

Where does the money come from then?

"Actually, we have them locally already, in property taxes. So, it's not like we don't use them."

Broken down, a property tax is a land tax plus a wealth tax. The former is an efficient tax. The latter ideally shouldn't exist. A wealth tax in justifiable insofar as it approximates an income tax. If you have a big house, chances are you also have a large income. But it's not the most efficient way to go about it.

"It frees up money for spending like disaster relief and it pays for mortgages and student loans."

So, say I own an apartment complex in California, and it's value increased 2% this past year, entirely due to inflation. How does that end up as cash to fix a boardwalk in Atlantic City?

"You're the one who suggested a VAT."

Indeed I did. Combined with a tax on assets.

"Where does the money come from then?"

Apologies, but I don't understand your question.

"Broken down, a property tax is a land tax plus a wealth tax."

Looks like an asset tax to me.

"A wealth tax in justifiable insofar as it approximates an income tax."

This is an opinion stated as fact.

Anyway, the following is the logic tree, in my view:

1) The federal gov't spends more than it takes in in providing services, and in tax giveaways.

2) Federal debt now apx. equals GDP, and the bills will need to be paid someday, somehow.

3) Services can be cut back (defense, medicare, etc.), as can tax giveaways, the latter which tend to help the affluent most directly (writing off business operating costs, capital costs, depreciation, etc.).

4) And, given that 1% own 40% of assets, one additional way to balance the books is through an asset tax.

5) A VAT will most likely be added one day as well, to spread the opportunity to increase revenue.

If you can get equivalently inflated rent from your tenants, that apartment is an inflation hedge. It'd be different if you couldn't or if you were holding it all in cash. As I stated, inflation isn't an asset tax insofar as inflation hedges are concerned. I also stated why we want inflation hedges. Without them, you'd be discouraging wealth accumulation and encouraging things like vacations and entertainment which would escape your wealth tax. That's why an income or consumption tax is preferable.

"the money isn't there when taxing the income of wealthy folks"

So where is it then? The wealthy get their money from somewhere and it can be taxed at that point, instead of annually.

Asset tax, wealth tax, whatever you want to call it, I was saying that portion of the property tax is less efficient compared to an income or consumption tax.

I'm not gonna get into another debate with you over opinions vs. facts. If you disagree with something, offer counter-arguments.

You were doing fine from #1 to #3. Few would disagree. Most of us also favor a VAT. #4 is what you have to defend. You can raise revenue from the wealthy by taxing private jets more but how is that better than the alternatives? How is your wealth tax better than simply taxing income or consumption at a higher rate?

1. We want government to provide public goods. National defense, roads, law enforcement, basic research.
2. We want government to provide a safety net for those who are unable to escape poverty through no fault of their own.
3. With the exceptions of #1 and #2, government crowds out private investment.
4. Cut spending on #3. E.g., solar panel subsidies and NPR.
5. Levy usage fees. E.g., a mileage tax to pay for roads.
6. Levy a land tax. Likewise a radio spectrum tax.
7. Cap-and-trade. It should be revenue-neutral to produce Kaldor-Hicks efficiency.
8. Levy a VAT.
9. I have a few ideas for welfare pursuant to #2. I'm not sure how much of a work requirement I'd want to impose. In any case, they all involve cash transfers, school vouchers, and mandatory health, unemployment, and retirement savings/insurance.
10. I'd leave sin taxes up to the democratic process but they should all be revenue-neutral for the reason stated in #7.

All taxes are regressive, because the wealthiest figure out how to minimize them. Everyone else either pays the full rate or sees the price of goods increased as taxes are passed through.

A VAT would help with our trade imbalance, and if it replaced payroll and corporate taxes would be a much fairer and more reliable source of revenues with lower costs of compliance--for example it would make an ideal dedicated revenue stream for the entitlement programs.

"All taxes are regressive, because the wealthiest figure out how to minimize them."
Only if loopholes are created which allow them to.
Regarding a VAT, even though I referenced one above, it's actually a type of sales tax, which is regressive.
So, if one is ever created, I'd politely suggest that other taxes should be added (i.e., an asset tax), or existing ones modified (closing of loopholes which benefit the wealthy) to offset the negative impact of regressive taxation

Closing loopholes is a great idea, no doubt, with or without a VAT. To offset the more visible 'regressive' nature of a VAT, I suggested using it to replace corporate income taxes (which are passed through to the consumer anyway, along with the quantifiable direct costs and substantial but unknown inefficiencies associated with corporate tax minimization) and payroll taxes (which hit the worker's income directly, reducing her opportunities for both consumption and savings).